Daily-use products to become cheaper, say FMCG firms

The announcement of the GST rates has brought cheer to at least some consumer goods firms, which expect the decision to help boost consumptionRatna Bhushan | ET Bureau | May 19, 2017, 08:27 IST

Picture source: ThinkStockDaily use products such as hair oil, toothpaste and soap are expected to become cheaper as these will be taxed at 18% under GST compared with 28% at present.

Cereals, which now attract a 5% tax, have been exempted, meaning these too are likely to become more affordable.

Announcement of the rates has brought cheer to at least some consumer goods firms, which expect the decision to help boost consumption and stir up activity in an industry as it is recovering from the impact of demonetisation.

“Within the slabs that have been announced till now, the impact is positive and not inflationary on daily consumption products,” Dabur CEO Sunil Duggal said.

“We have to see tax slabs on input costs to decide final impact on end consumer prices, but the overall indication is sector positive so far.” Dabur makes Vatika hair oil and Babool, Meswak and Red toothpastes.

The March-quarter results of listed companies such as Hindustan Unilever, Nestle, Dabur and Marico indicate that the Rs 2.5 lakh crore FMCG sector has mostly shrugged off the impact of demonetisation.

The GST slabs announced so far indicate that mass consumption items will be taxed lower; that will not only reduce inflation but also fuel consumption,” said Saugata Gupta, MD at Marico, maker of Parachute hair oil.

Tea, coffee and sugar, which have been put in the 5% slab under GST, may not see a significant impact on prices as these are already in the 4-6% bracket.

Indian sweets, or mithai, are in the 5% slab. Staples such as pulses and food grains have been added to the list of tax-exempted items. These staples were previously taxed between 1% and 5% in different states.

“Milk and curd under VAT is already exempted. In some other food categories, prices should reduce though the fine print has to be examined,” said RS Sodhi, the MD of MD of the Gujarat Cooperative Milk Marketing Federation.